Whats your Risk percentage per trade?

Aug 25, 2011
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Forex Risk Management – Whats your Risk % per trade?

Forex Risk Management
FOREX RISK MANAGEMENT

Whats your risk % per trade?
Or should i say, what’s your risk appetite?
To be a successful forex trader. You will need to have a proper money management system.
It starts with identifying what level of risk % per trade will you risk.
As a guide, a safe and good risk percentage will be from 1% – 3%.
Anything higher than 3% will be relatively risky.
Why is this so.
If you understand, the forex market can do anything.
Even if you are sure this is the MOST perfect setup.
It MAY NOT end up the way you expected it to be.
Why?
Forex Risk Management – Whats your Risk % per trade?

Forex Risk Management
First, you must understand that anything can happen in the forex market.
Just for example, even if it is the most perfect setup. If a major institution pumps in a large sum of money at that period of time. It can change the direction of the market for a short time frame.
And when the retail investors see the market moving in the direction stipulated by the major institution, they will then follow suit and enter the same way.
WHICH causes the movements in the market.
But of course, this doesn’t happen always.
What i’m saying is, anything can happen in the forex market.
So even if you are the best forex trader in the world. You will not have a 100% winning rate as well.
You will still lose as the market can do anything.
Which is why, it is not wise to have a high risk per trade.
Forex Risk Management – For example, if a trader risk 10% per trade.
And a series of unfortunate events happen to him, (maybe it’s a distraction, maybe there’s an earthquake etc)
As a result, he made a series of 5 losing trades.
He would have wipe of 50% +- of his trading capital because he risked 10% per trade.
And with just 50% left, it will be hard for him to make back his loss.
So if you see what i meant.
Forex Risk Management – For example, if you risk 2% per trade.
With a series of 5 losing trades. You would only lose 10%+- of your capital.
Which is not to bad.
With a good trading system, we can easily make back the money loss.
Forex Risk Management – Whats your Risk % per trade?

Forex Risk Management
But here comes the big question.
What is your risk appetite?
You see, there is absolutely no point into asking you to risk 1% per trade.
Forex Risk Management – Eg. Capital $5000
Risk of 1% = $50 per trade.
If at the back of your mind, you do feel that $50 per trade is too little.
Then you will most likely find and trade even more trades that you usually should – in order to make more money. Right?
Therefore, the correct way to set your risk % per trade varies with different individuals.
You must ask yourself.
Forex Risk Management – Eg. Will you be satisfied with
$50 per trade or
$100 per trade or
$150 per trade
based on the capital of $5000
Once you got an answer, you got your risk percentage.
Forex Risk Management – Whats your Risk % per trade?

Forex Risk Management
Remember,
1) Your risk percentage cannot be too high. As mention a good gauge is 1% – 3%.
2) Your risk percentage must meet your risk appetite. There is no point in risking 1% if you find the amount too little and does not satisfy your hunger.
So there you go.
Once you have set and decided on your risk % per trade.
STICK FIRMLY TO IT!
For example, in a series of trades. You cannot have eg. 1% on 5 trades, then 3% on 5 trades etc.
Because if you play it this way, and what if you make money on the 5 trades with 1% risked, and lose money on the 5 trades with 3% risked. (which usually happens!)
YOU WILL LOSE MONEY!
Therefore, stick firmly to the risk percentage per trade which you have set.
Eg. If you set 2% risk per trade.
From now on, every trade you take – You will risk 2% per trade.
NOTHING MORE, NOTHING LESS.
This way, you will be consistent and you are on the right track to success.
This is part 1 of the 2 series of Forex Risk Management.
Stay tuned for the 2nd part.
Check out our online forex trading AFM winning Forex Price Action Forex Course where i teach you the exact FULL Forex Trading Strategies | system that i personally use to be consistently profitable.
See you on the other side my friend,
Asia Forex Mentor
Ezekiel Chew
Asia #1 Forex Mentor
 

Easy Trader

Master Trader
Sep 17, 2011
240
4
59
I risk 2%, I wanted to post a article I read a few years back but couldn't find it. But in short it explained how a lower risk proile of 1-2% is actually more profitable than say 5-6%. The reasoning is that when a trader looses 5% of their account the drawdown on the account lengthens the over all equity curve of the growth potential. This may seem irrelivant with a difference from 2% to 5% but coupled with the compounding nature of leverage it makes a huge difference.... If a trader looses 50% of their account they must then make 100% of the new balance just to get back to B.E. even with smaller percentages like 2-5% once the threshold is crossed(depending on a traders win/loss ratio) it becomes a 2 steps forward 3 steps backward situation. @2% with 5 loosers in a row thats a drawdown of 10% which is definetly big but still not crippling, the same senario @5% is a 20% drawdown which to me is devistating and also comes with the emotional and mental drawbacks at a time when a trader would need all the dicipline in their arsenal. For me' the market will always give out pocket change but rarely makes one filthy rich over night, so I just keep compounding the pocket change, and survive when the market wants to nibble back at me. Pretty soon my pocket change will be big bucks. Not to mention I am growing into larger lot sizes which is good mentally instead of just showing up with a bank roll and sweating bullets when I place 20-50$ a pip orders. Im rambling now:rolleyes: happy trading everyone
 

Enivid

Administrator
Staff member
Nov 30, 2008
16,852
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Odessa
www.earnforex.com
Never thought about such difference between 1-2% and 5-6%. Will try to pay more attention to it when testing my expert advisors in the future.

I usually risk 1-1.5% per trade (yes, I am wimpy). But for some trades (like my current long-terms buys in EUR/CHF) I go with a really huge risk of 30-40% per trade (but I don't recommend anyone to do the same).
 

Fxpipper

Master Trader
Oct 26, 2011
1,132
4
49
30%-40%, wow! Isn't that too much of a risk..planing to stick to the 1%- 3% figures. I have just started out with tradersway and planning to set up two more accounts..
But thanks for the info, when will you be posting the next part of Forex Risk Management?
 

eyeball

Master Trader
Sep 25, 2011
164
11
49
Think of risk in terms of actual money rather than any particular percentage. If, for example, your expectation for a day of trading is to make $500 ( based on actual consistent experience) and you can and have achieved that on most days, than risking a days profit on any particular trade, no matter whatever percentage, is not highly risky. You may lose today, but comeback tomorrow, presuming a $500 loss does not reduce your trading bankroll to a point at which you must cut back your size of trade. Also , percentages fail to take into account volatility. 2% on some days may represent a full days range, and yet on others. merely a blip on your charts. Ofcourse the most important determinant is your own risk appetite ,or risk aversion. This is a game in which some losses are unavoidable. We hope that our winners will be sufficent to overcome the losses and leave a profit worth the effort and time involved . Good luck.
 

Stevenfx

Trader
Oct 30, 2011
20
0
17
Hi asiaforexmentor1, I wanted to thank you for sharing this with us, personally it helped me a lot, since I am a newbie and I am just getting started.. It made me realize how important the risk level is while trading, and also how important is to have a plan and stick to it. Thanks !
 
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Fxpipper

Master Trader
Oct 26, 2011
1,132
4
49
Think of risk in terms of actual money rather than any particular percentage. If, for example, your expectation for a day of trading is to make $500 ( based on actual consistent experience) and you can and have achieved that on most days, than risking a days profit on any particular trade, no matter whatever percentage, is not highly risky. You may lose today, but comeback tomorrow, presuming a $500 loss does not reduce your trading bankroll to a point at which you must cut back your size of trade. Also , percentages fail to take into account volatility. 2% on some days may represent a full days range, and yet on others. merely a blip on your charts. Ofcourse the most important determinant is your own risk appetite ,or risk aversion. This is a game in which some losses are unavoidable. We hope that our winners will be sufficent to overcome the losses and leave a profit worth the effort and time involved . Good luck.

That works both ways, doesn't it? I mean, you can think of your "risk" in terms of percentage or just money you're willing to risk on a day to day basis. And yes, as your capital increases, wouldn't the "risk capital" increase as well..
It's just that I thought the idea of risking 30%-40% is way too risky, at least, for me anyway.
 

Easy Trader

Master Trader
Sep 17, 2011
240
4
59
It's just that I thought the idea of risking 30%-40% is way too risky, at least, for me anyway.

Most profitable traders will take some profits and open a seperate high risk account and run 30-40% risk. This account balance usually is considered dead money or house money and is only their to purchace leverage. I 'think' that is the context in which this risk profile was used in the post. I personally plan on utilizing this strategy in the future and as high risk profits are made they go directly to a standard risk account keeping only the original dead money.
 

Fxpipper

Master Trader
Oct 26, 2011
1,132
4
49
I got the concept and still think it's a high risk strategy, one that may work provided you're really great in fx trading. For example, I use tradersway and a couple of other brokerages and the one way the strategy listed above may work will be where the high risk account is actually one you can afford to lose and not worry about..makes more sense if that's the case.
 

Ary Barroso

Active Trader
Jul 9, 2017
908
70
39
34
Currently I am taking only 1% risk percentage; yes I am comfortable with the low percentage since I focus on mainly consistency! By the way, one year ago I worked with 2%.